An early forecast for next year’s Social Security Cost of Living Adjustment suggests retirees may be in for a surprise.
The Senior Citizens League, a nonpartisan advocacy group, predicts a 2.1% COLA in 2026, based on data from the Bureau of Labor Statistics’ CPI-W, the index used to calculate annual increases. The CPI-W increased by 2.8% in December.
The most recent forecast reflects slowing inflation, which could result in the lowest COLA since the beginning of the COVID-19 pandemic. The COLA in 2025 was 2.5%, down from 3.2% in 2024 and significantly lower than the 8.7% received by beneficiaries in 2023. The last time COLA fell below 2.0% was in 2021, when it was 1.3%.
TSCL Executive Director Shannon Benton stated that the predictions, while premature, indicate a serious problem for senior citizens.
“Slowing inflation does not indicate that seniors are catching up. “It is critical that Congress act quickly to address years of subpar COLAs and help seniors achieve the quality of life they deserve,” Benton said. “The Trump administration’s plan to eliminate taxes on Social Security benefits would have a huge impact.
The current thresholds used to determine whether you will pay taxes on your benefits were established in the 1980s, and we have never adjusted them for inflation.”
According to TSCL survey data, 67% of seniors rely on Social Security for more than half of their income, and while slowing inflation is beneficial, it does not imply that prices will fall; rather, they will grow at a slower rate.
“This leaves many seniors with a budget shortfall. According to data from TSCL’s 2024 Senior Survey, 62 percent of older Americans are concerned that their retirement income will not cover necessities such as groceries and medical bills,” TSCL stated.
COLAs, which are intended to keep benefits from being eroded by inflation, are calculated using data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, which measures the average price of a basket of goods.
The COLA is calculated by comparing the average CPI-W for the previous year’s third quarter – July, August, and September – to the same period in the current year, with the difference representing the COLA.